MUMBAI: Corporate debt restructuring (CDR) schemes to tide over non-performing assets (NPAs) — loans that do not yield returns — are losing sheen, with Rs 31,557 crore worth of failed cases seen in 2015-16, without a single recast request received in the first two months of the current fiscal.

Since its inception in 2001, the number of cases referred to the CDR cell as on March, 2016 stood at 655, with an aggregate debt of Rs 474,002 crore — unchanged from March 31, 2015.

The number of cases hit a three-year low in 2014-15 at Rs 44,014 crore, against Rs 1.3 lakh crore in 2013-14, according to data from the CDR cell.

In 2015-16, six companies, with a total debt of around Rs 2,613 crore, saw successful exits under the mechanism. These include Sanghi Industries, Indo Count Industries, Haldia Petrochemicals and Ginni Filaments, among others, according to a SBI report.

But 231 of the 530 total approved cases, with an aggregate debt of Rs 252,235 crore, are still live under the CDR mechanism.

Restructuring offers relaxed interest rates, and a two to three year moratorium on interest payments to borrowers. But approvals take longer as lenders have to agree on mutual terms. The delay affects both companies and banks.

“According to RBI guidelines, there will be no restructured account classification beginning April 2015 and hence, banks have to set aside 15% as provisions for the accounts under CDR as well (as they will be accounted as NPAs). If the bank has the option to keep an account standard, it will explore that first and keep it outside CDR. Also, there has to be a solid reason for it to be provided with restructuring, said Viney Kumar, chairman of CDR cell and executive director at IDBI Bank.

CDR mechanism covers projects where credit is disbursed by multiple banks, and outstanding aggregate exposure is Rs 10 crore and above. It is based on the principle of approvals by a super-majority of 75% creditors (by value), which makes it binding on the remaining 25% to fall in line with the majority decision.

When a borrower fails to pay interest for 90 days in succession, the loan turns bad. Usually, banks lend additional capital to help the borrower keep up with interest payments. In severe non-payment cases, banks recast loan terms, providing a much-needed breather to pursue project development.

The downside of getting a project into the CDR system is that once a loan is categorised bad, credit flow stops, thereby stifling the viability of the project.

“The CD R mechanism was used to extend repayment schedules to revive cash flows. Unfortunately, a vast majority of cases failed. The moratoriums added significant incremental debt, making it further unsustainable,” said Nikhil Shah, managing director, Alvarez & Marsal India, a company that advises stressed companies.

New options, including joint lender forum (JLF) and strategic debt restructuring (SDR) are also helping banks deal with stressed assets.